To be Healthy, Wealthy and Wise

With the growing consciousness of eating healthy, the Indian health food (functional) market is all set to rule the roost, informs Nayantara Som

Food is and has always been a central force for Indians. Now, it's not just food but 'healthy food' that is dominating the picture. Opportunity has finally come knocking for the health food industry in India with an upward trend in its growth graph. According to a report of the Confederation of Indian Industry (CII), the Indian food industry is estimated to be worth over $200 million and is expected to grow to $310 billion by 2015. The food processing segment accounts for $29.4 billion, in a total estimated food market of about $91.7 billion worldwide. The same report of the CII has also estimated that the food processing sector has the potential to attract $33 billion of investment in 10 years and generate employment of 9 million.

Lifestyle Effects

Experts assert that this is a ripple effect of urbanisation. The year 2007 has seen the average Indian witnessing a 360-degree change in his lifestyle habits with a skyrocketing of lifestyle diseases, which has led to his fascination with the new generation of health food products christened as functional food products. Over the last three-four years, consumer health consciousness has been the stimulus for the rise of an industry with an approximate total turnover of $69.4 billion out of which value-added food products comprise $22.2 billion (as per a study conducted by McKinsey and CII).

An important point to remember is that today's Indian consumer is a 'choosy consumer' willing to go that extra mile for quality products rather than 'just another product'. This is applicable for food products as well. Today consumers are more conscious of the importance of a balanced and varied diet. This is reflected in the mushrooming of myriad fitness gyms and health related boutiques—a trend that has been prominently observed in the West. Busy work schedules keep people away from healthy food habits and make them a vulnerable target for all sorts of lifestyle diseases and chronic ailments. Says Paul Thachil, CEO, Mother Dairy India Ltd, "Indians today are well aware that their daily regime and diet is appallingly faulty and that a balanced diet needs all the possible health nutrients and health promoting ingredients."

"A general increase in awareness has been fuelled by the favourable scientific reports about the health benefits of nutraceutical ingredients. In the developed countries the ageing population who are more health conscious look towards consumption of such supplements and foods that provide an optimum balance of nutrition," adds Aditi Paul, Research Analyst, Chemicals, Materials and Foods Practice, Frost & Sullivan - South Asia & Middle East.

"Increased affluence of the West has made health food products accessible to a larger segment of the population" - Sandip Dang CEO Avesta Good Earth

"The entry of large supermarkets, food retail outlets and MNCs has enhanced the scope for growth and availability of health food products" - Ashish Kirpal Pandit CEO Fortis Health World

Demonstration Effects

The rise of the health food market is a reflection of Western trends which have an increasing impact on Indians. Says Sandip Dang, CEO, Avesta Good Earth, "Increased affluence of the West has made health food products accessible to a larger segment of the population. In recognition of these trends, food marketers in the country have introduced a number of new products, and this has spurred the growth of the health food market." In a tech-savvy age, technological advances and increased evidence of clinical research have promoted this industry. "In the European Union and the US particularly, there is a major hype regarding the clinical and scientific evaluation of the health benefits of such supplements and functional foods. The amount of research done and investments therein puts these functional foods on the forefront and helps gain consumer confidence," adds Paul.

This year, India has also seen a number of food retail outlets and supermarkets (like Reliance for instance) making a sweeping entry into the market. India will also see in the near future the entry of global bigwig Walmart, which is a motivation for the health food industry to expand their horizons further. This coupled with the aggressive marketing strategies is a definite driver for this market. Elaborates Ashish Kirpal Pandit, CEO, Fortis Health World, "The entry of large supermarkets, food retail outlets and MNCs has enhanced the scope for growth and availability of health food products, as they attract discerning customers with an eye for quality."

Functional Food

Functional food also termed as the 'nutraceutical' products (a hybrid of nutrition and pharmaceutical) is any fresh or processed food claimed to have health-promoting ingredients apart from its basic nutritional function. Says Aditi Paul, Research Analyst, Chemicals, Materials and Foods Practice, Frost & Sullivan - South Asia & Middle East, "The typical functional foods could be anything like the prebiotic, probiotic foods, omega fatty acids or even crops that naturally contain components that aid the body functions like soy, gluten or whey proteins." Thus, these would include fruits, vegetables, energy drinks, juices with or without preservatives, breakfast cereals and fresh dairy products-all imparting the desired health benefits and physiological changes. Adds Paul, "The health food industry covers the dietary supplements and the functional foods segments. Dietary supplements are essentially food supplements which supply vitamins, minerals, fatty acids or even herbal extracts to the diet. Functional foods on the other hand refer to processed foods containing ingredients that aid specific body functions in addition to being nutritious."

Different Strokes for Different Folks

The target population differs from one company to another depending on its product portfolio. For health products like breakfast cereals, fruit juices and health drinks the target population is mainly the urban populace and that too at the A+ and A level or sometimes even catering to a particular gender. Kellogg’s India offers a host of low-fat breakfast cereal options for children, adults and all family designed to meet their specific needs. "Mental performance is a key need in India. Kellogg's Corn Flakes and its range of six variants deliver on this benefit to all members of the family through its unique Iron Shakti," says Anupam Dutta, Managing Director, Kellogg's India.

Again, take for instance Avesta Good Earth, which mainly targets women in cities. "The primary target audience for Avesta Good Earth Muesli is the Indian housewife, mainly in her role as mother. More specifically, we are targeting women in the age group 25-45, in the metros, with an SEC A profile. Actual consumers would be the entire family, but the purchase decision would often reside with the mother," opines Dang. The company has launched products like Muesli Breakfast Cereals, Muesli Bar and Whole Wheat Crackers (mainly breakfast items). The idea here was to enrich the daily diet with proteins and fibre, with the multi-grain cereals of oats, corn and wheat flakes, balanced with natural carbohydrates, vitamins and minerals. Muesli is also a catalyst in lowering cholesterol and controlling diabetes. The company is looking at expanding its distributors from 32 to 60 in 53 towns by September this year and is targeting the urban Indian housewife. Many companies also target children at large. "Mothers know how difficult it is to combine nutrition with taste for children to finish their breakfast before rushing off to school— Kellogg's Chocos and its three variants deliver this by combining the goodness of whole-wheat in a chocolate taste along with Calcium Shakti (providing 75 per cent RDA for calcium)," adds Kellogg's Dutta.

Mother Dairy India Ltd, which specialises in milk, yogurt, butter, ghee and buttermilk, also targets mainly children who "need health products more than any other segment." Though products like butter and ghee are perceived as high in calories, the company believes that the flavour and the vitamin A in their ghee and butter products are vital for the overall growth of a child. Similarly, health and energy drinks in a way also tap this segment of the populace. Top-notch GlaxoSmithKline Consumer Healthcare manufactures and markets health drinks like its clinically-proven product Horlicks, Boost, Viva, Maltova, in addition to energy snacks like Horlicks biscuits. Seeing the popularity, 500 vending machines for Horlicks and Boost were launched by its Nutritional Food Services Division in July 2003 at schools and hospitals.

However, India with a population of 1.08 billion has a large chunk of middle and lower middle class. Hence, by including this segment of the population within the fold of their business strategies, companies and individual entrepreneurs would turn the scales to a profitable avenue. Three years ago, Fabindia ventured into the organic health food products called Fabindia Organics with no preservatives or colours added. They cater to a larger spectrum including the middle class and the rural segment at large. A significant point is that for organic farming Fabindia works closely with the rural community. Hence, in this case there is a demand and a need generated not just in a particular watertight section of a society. Says Jashwant Purohit, Senior Partner PSC—Organic Food & Body Care, Fabindia Overseas, "We have a committed set of the populace for the organic health food products, mainly the middle class, and from the rural communities in particular. So our products are an extension of the rural community." Talking of innovation, the organic health food products are not to be excluded. Organic food is healthier on two grounds—it is high in nutrition and excludes the toxic chemicals and Genetically Modified Organisms (GMOs). In India, chemicals are often added to crops, which reduces our nutritional value by almost 76 per cent. Organic products eradicate this problem. Says Purohit, "Our aim is two-fold—to make traditional organic farming a modern economic option for farmers, and to give our consumers a healthier and chemical free diet."

Apart from this, companies also address key issues. In order to address the problem of malnutrition and malnourishment, Kellogg's launched the Kellogg's K-Pak as an affordable offering in three variants making Kellogg Nutrition available at Rs 10.

Begin Royally

Breakfast Items: An adage recommends us to eat 'breakfast like a king and dinner like a pauper', which is why companies are looking at manufacturing healthy breakfast items. The focus has now shifted from ‘aloo-parathas’ to ‘maida-free’ items. The cereals business is one arena which at present is going great guns. "The consumer trend has grown towards more healthy eating habits, a move away from traditional maida-based cereals towards products with oats and wheat flakes which are excellent sources of fibre, very important for the intestinal tract and which have cholesterol- lowering properties," explains Dang. Breakfast items include cereals, energy bars, fresh dairy products and fruit juices. Take Paris-based company Danone Group which specialises in fresh dairy products, cereals and biscuit products and which is now venturing into India by tying up with Britannia to get into breakfast items.. "We have sales of EUR 2.4 billion, out of which the biscuits and cereal products business accounts for 18 per cent," says Frank Riboud, CEO and Chairman, Danone Group. This is evidence of the growing demand for breakfast cereals in the market.

Sugar Free: With India becoming the diabetic capital of the world, companies are now cashing in on manufacturing products which are sugar free or have a lower content of sugar or are fat free. Kellogg’s for instance manufactures breakfast items with lower sugar content. Sugar sweeteners and even diabetic jams are in vogue in the market.

Dairy Products: The fresh dairy business is also growing at a brisk pace. Dairy products were always a health product before the 'health food' revolution which is why today they easily have an edge over the market. "Our fresh dairy products have seen a growth of 30-35 per cent with our milk products alone seeing a growth of 10-12 per cent last year," reveals Thachil.

So are fresh dairy products with low fat content. Says Thachil, "Our curd and milk products, though a little expensive, have less fat content than the usual products." A slight premium in the price is never detrimental for the company. If 200 gm of milk costs Rs 12 then the 90 gm product will be Rs 6.

The difference is miniscule. "The products are not highly overpriced because we want to be available to a larger part of the population," adds Thachil.

India is also witnessing the launch of a number of pro-biotech products. Pro-biotech is good for the digestive system, helping in better absorption. The products ingest the so called 'good bacteria' of the body, thus making the immune system stronger. Ice-creams, perceived as having a high calorie content have also been metamorphosed by health food companies into pro-biotech ice cream products. So here we have products which cater to the taste buds as well as the health ingredients required. It is like hitting two birds with one stone.

Snacks: The health food pundits have not even left snack food products. Sarda, which specialises in ready-to-eat fruit snack products is cashing in on this trend. "Fruit-based snacks were not available in India except on a small scale with limited distribution. Our product Vitamla has found very good acceptance in the market and our sharbats have done extremely well in their first season negating the view that ‘sharbats’/squashes are a shrinking market," says Sandip Sinha, CEO, Sarda. Avesta Good Earth has also come up with wheat crackers in six variants. With low saturated fat and zero trans fat, these innovative crackers, also a source of dietary fibre, are the perfect example of good health and great taste coming together in an anytime snack.

Juices: "Juices and health drinks have a direct connotation to our health. Hence, we have a huge growth in this segment of the industry," says Thachil. Mother Dairy India Ltd last year saw a growth of 40-50 per cent in their juice products. Again energy drinks for children have gained immense popularity in the market, this time for the blend of both flavour and health benefits. This can again be shown in figures. GlaxoSmithKline with its energy products like Horlicks, Boost, Vive and Maltova has achieved a double-digit sales growth of 11.5 per cent over 2005. The company's Profit After Tax (PAT) grew by 18.4 per cent over last year to Rs 126.9 crore and Profit Before Tax (PBT) grew by 17.3 per cent over last year to Rs 190.6 crore.

Nascent India

The Indian health food market is definitely in its nascent stage. In most retail outlets, a majority of the products are imported, which establishes the upper hand that foreign food products have over their Indian counterparts. Commenting on the products of retail chain Fortis Healthworld’s Pandit quips, "The Indian health food market is still at a nascent stage as about 75 per cent of the health food brands are imported and have a high turnover." Experts also feel the same, but are optimistic about its growth. "The global functional food market is large, in excess of $80 billion, with the US and Japan being the largest markets. The Indian functional food market, apart from the dietary supplements, is estimated to be about Rs 125 crore, and will grow with the introduction of relevant products in this space," says Dang. The US and Japan are not the only players in the race. So strong is the functional food market that countries like the UK, Germany, France and other countries of Western Europe have also joined the race. Informs Paul, "The world functional foods market is at its growth stage with a market growth rate of 12-15 per cent. There are a large number of products being offered today and with increasing number of players the market is getting more competitive. In the last three-four years, a good number of manufacturers have entered this market most of them being large food processors and this has definitely proved to be a market booster with a lot of medium food innovators following suit."

Future is Bright

There is lot in store for the Indian health food market. There are more stores coming up, new products and international names in the scenario. ‘Manipal Cures and Cares’ is contemplating bringing in health food products into their retail outlets. "The market in the future is expected to grow at 40 per cent minimum per year going by conservative estimates," points out Sinha. An increased number of players and competitors will dominate the overall market. So what should be the key mantras for India to catch up with its global partners? Paul opines, "The key strategies of success in the health food industry are a high level of product technical innovation and service. Ingredient manufacturers should collaborate with large end users and technology firms in order to maintain a healthy market share through customer satisfaction and innovation. Lastly, there is a need to develop intellectual capabilities in order to address the needs of diverse end use segments."

In this race, India does have a lot of catching up to do but then our Western counterparts were in the same place a couple of years back. Agrees Purohit, "The market in the West took a lot of time to reach to the apex of the growth path where it is today. India should be given time. We are definitely on the right path."

nayantara.som@expressindia.com